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The following article was published in our article directory on December 22, 2010.
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Article Category: Business
Author Name: Amanda xzh
International rating agency Moody's Investors Service recently on the euro area financial system with a "hard hand." The company announced Dec. 21, will be included in the Portuguese government bond rating on negative watch; after day, Moody's announced that the Irish cut the ratings of financial institutions 5 and 30 warning of the Spanish bank's debt rating risk.
In this regard, well-known investor George Soros said the debt crisis is rooted in the European banking crisis, the EU's predicament of the road should be injected into the banking system as soon as possible.
Analysts said, going into the Western tradition of year-end holidays on the occasion, the euro area financial institutions and rating agencies have been warned over the past year has once again scarred the euro under pressure, and fall into the new channel.
Eurozone embattled banking system
21, Moody's said the Portugal "A1" long-term government bond rating and "Prime-1" short-term government bond rating on negative watch list, the recent ratings of the two were likely to cut 1 to 2 files.
Moody's vice president and principal analyst of Portugal Thomas said: "The Portuguese government's medium-term prospects for the debt affordability deterioration, the future of the country may be unable to maintain the 'A1' sovereign credit ratings." The agency believes that the implementation of tight fiscal policies of Portugal will threaten its economic growth prospects, the government's ability to enter the market and financing costs will rise, and the support of the banking sector will further increase the level of government debt.
Portuguese government aid its banking sector is increasing the burden indeed. Portuguese Ministry of Finance, 20, confirmed last week, the state-owned bank Banco Portugues de Negocios (BPN) to the Government for funding of about 5 billion euros, the ministry had yet to inject a specific time and scale of the decision.
20 Moody's announced that it has reduced the Irish four banks and an insurance company's bank deposits, senior debt, and most of sub-bank financial strength rating of securities, including some by the Irish government guaranteed debt ratings. This five financial institutions: Allied Irish Bank, Bank of Ireland, Ireland fraternity housing (EBS), Irish Life and Irish Nationwide Building Society Bank.
17, Moody's sovereign credit rating with the Irish down 5 file to "Baa1". Moody's said the decline in sovereign credit ratings, rating of the Irish banking system have a negative impact; fiscal tightening will result in greater pressure on the banking industry.
20 Moody's also said that Spain has 30 banks included in deposits and senior debt ratings on negative watch, and the rating of the Spanish financial system has taken several other actions.
Moody's will all receive government support for the Spanish banking sector debt, and the Spanish official credit bureau's long-term debt rating outlook lowered to "negative." In addition, the agency will also Spanish savings bank Caja Segovia and Caja Avila's "Baa3/P-3" deposit and senior debt ratings into the "uncertain" list, and Caja Espana and Cajastur independent bank financial strength rating outlook from "stable "down to" negative. "
Last week, Moody's sovereign credit rating outlook has been incorporated into the Spanish "negative." The agency said that the Spanish banking system's dependence on government support, is to adjust the rating of the Bank of an important reference factor.
Prospects are not optimistic about the euro
Soros, 21, said the EU is not just facing a currency crisis, it is a banking crisis, if you want out of the current difficulties, the EU must inject capital into the banking system as soon as possible.
Soros pointed out that the EU financial regulatory authorities have committed at least two errors. First, some banks have seriously insolvent, the euro area is still its member governments inject capital for the bank shareholders by the taxpayer "bill." Soros believes that the EU should use the mechanism of stability in Europe rescue fund to inject liquidity into the banking system, the inflow of external funds can be help to some extent alleviate the burden on the country's deficit. He said capital injections into banks "sooner rather than later, to be launched at the EU level, not by the member states themselves to resolve."
Second, he believes that the EU has introduced the Greek and Irish aid programs, assistance in loan interest rate is still too high, which will be more heavy debt recipient countries, increasing the status of the euro zone economic polarization.
Mizuho Securities analyst predicted the end of 2010 and early 2011, the euro against the dollar will face "significant volatility." BNP Paribas analyst, said: "The overall outlook is not optimistic about the euro, is expected before the end of the year against the dollar will fall further." SocGen said in early 2011, the euro fell below 1.3000 against the dollar may be the location.
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